Understanding Credit Scores

Understanding Credit Scores

Credit Scores – Maximizing your credit score for Mortgage Loans
Learning more about Credit Reports and Learn How
with Lenders they work for you or against you

What exactly is a Credit Report?

A credit report is a printed record of your credit activities over your life. It displays a list of credit-card accounts & installment loans you may have. It also notes the balances, and the frequency you make your payments. In addition to credit accounts, it shows if any negative action has been reported against you because of negligence like a collection or bankruptcy.

Where Do Credit Reports Originate?

There are companies that sole purposes are to gather and sell credit information. They are called a consumer reporting agency , also known as CRA. These types of companies collect information about your credit activities, store it in their databases, and charge a fee for providing the information. Credit bureaus are the most commonly known CRA. Equifax, Experian, and Trans Union are the leading credit bureaus used for loan qualifying.

What is a Credit Rating?

Credit ratings are created from each bureau and listed on your credit report. The detail your history of borrowing, and re-payment records. High Credit Ratings cans help you maximize low rate, and increase your purchase power or credit limits. Low ratings can significantly hinder your credit limits and quite often bad credit with low credit scores will eliminate your eligibility for many mortgage and home equity loan programs.

Since your credit report influences whether you are able to buy a home and get a job, it is extremely important to protect your credit rating by making loan and bill payments on time and by not taking on more debt than you can handle.

In the mortgage industry, who will be reviewing my Credit Report?

Credit bureaus provide information to brokers & lenders who are considering lending terms to a consumer. Loan officers, and Underwriters are most likely the people who will be analyzing your credit report.

What Type of Information Is on Your Credit Report?

Identification: full name of borrower, any known aliases (AKA’s), addresses history, social security number, date of birth, name of employers.
Credit Information: accounts you have established with banks, retail stores that issue credit, credit-card companies, lenders
Public Records: State and county court records on bankruptcy, tax liens, or monetary
Recent Inquiries: The names of those who have obtained copies of your credit report within the past year
Where Do the Consumer Reporting Agencies Get Their Information?

Credit bureaus collect information from companies that have extended credit to you in the past.

Who Decides whether or not you are Approved for a Home Loan?

Mortgage lenders create underwriting guidelines with credit criteria that will decide whether or not your loan will be approved.

Why Should You Obtain a Copy of Your Credit Report?

It’s kind of like getting dressed for an important interview. You want to look good and professional, and before you head off to the interview you will look in the mirror to make sure you are ready. Your credit report is your resume, reference letter , all in one for the lender to either grant you the loan or deny you credit. It’s imperative to see a copy of your credit report before you apply for a mortgage, line of credit or home equity loan.

How can you Correct Errors on Your Credit Report?

If you find an error, find the proof of the mistake and contact the consumer credit reporting agency. The company that reported the erroneous information, must then rectify or remove any incorrect data. Unfortunately, this process can take anywhere from 30-60 days.

What Should You Do if You Are Denied Credit because of Credit Score?

The lender who turned you down for the loan, must give you the following information: name and address of the credit bureau that produced the credit report. At that point, you have up to 30 days to request a copy of your credit report for Free. Credit bureau are required to share with you all information contained in your credit report.

How Long Does Information Stay on Your Credit Report?

In most cases, your credit history information is reported for 7 years. However bankruptcy filings, will remain on credit report for 10 years.

How Do You Get a Copy of Your Credit Report?

Contact the credit bureaus listed below to request a copy of your credit score.

To learn more about credit organizations in your area that help people solve credit problems, contact the National Foundation for Consumer Credit at (800) 388-2227.

Habla Espanol call (800) 682-9832.

The Federal Reserve Bank of San Francisco has several other consumer brochures.

These brochures are posted on our web site at: frbsf.org/publications/consumer.

For More Information:

National Foundation for Consumer Credit
8611 Second Avenue
Silver Spring , MD 20910

To contact the three major credit bureaus:

P.O. Box 105873
Atlanta , GA 30348

(800) 685-1111
Trans Union
Consumer Disclosure Center
P.O. Box 1000
Chester , PA 19022

(800) 916-8800 or (800) 888-4213
P.O. Box 2104
Allen , TX 75013-2104